Fashion curation startups like WithMe, Styledotme are carving a business out of recommendations

Fashion curation apps are carving a business out of recommending what to wear to style-conscious consumers. These startups boast of a stickiness that keeps users coming back, but is this a winning model?ET Bureau | Updated: May 20, 2016, 08:35 IST

By Taslima Khan ﻿ Neha Tyagi, employed with a research firm in Gurugram, often used Facebook for advice on what to buy or what to wear to a special occasion. The only hitch - she did not want all her Facebook friends seeing her trial pictures, and not all the responses were relevant.

Three months ago, Tyagi started using social fashion networking apps WithMe and Styledotme."Unlike on Facebook, people on these apps are serious about fashion. I recently uploaded two pictures of me (on WithMe), one in a black dress and the other in a rose print dress, for deciding what to wear for a birthday. While I got 33 'Yays' for one, the other got five 'Nays' from friends and stylists on WithMe. That helped," said the 24-year-old fashionista, who has 200 'followers' on WithMe.

Styledotme and WithMe belong to a genre of startups that offer personalised styling, a networking platform for people with similar interests in fashion, and lead customers to online retailers that sell fashion products recommended by them.

In the past 12-15 months, at least a dozen such startups have secured significant money from investors. Fashion network Roposo, which is backed by New York-based hedge fund Tiger Global Management, recently raised $5 million (about Rs 33 crore) from Bertelsmann India Investments, taking its total funds raised to $21 million.

"Social media is the new fashion guru," said Saket Dhankar, a former head of fashion at IMG Reliance who, along with other wealthy investors, put money into WithMe this year. "User-generated content like do-it-yourself hacks, mix-and-match and street-style experiments are aiding consumers in the discovery of fashion and trends."

Fashion ecommerce - which Google India estimates will grow to $35 billion by 2020 (or around 35% of total ecommerce revenue) - is the largest and most profitable ecommerce category globally. Importantly, the segment offers tremendous scope to experiment with business models.

In large ecommerce economies such as China, social-fashion startups occupy significant space. Mogujiem, among China's biggest fashion startups with more than 80 million users, in January struck a $3 billion deal to buy rival Meilishuo. Last year, Yahoo acquired American fashion app Polyvore for $230 million.

What makes these firms so relevant to users? Ashutosh Pandey, chief executive at WithMe, put it this way: "Unlike other products such as electronics, which are very standardised, with most searches directed at price comparison, fashion buying is extremely complex in terms of choosing from a plethora of choices that suit individual tastes."

The crux of what fashion personalisation and recommendation platforms do is "a combination of deep data science and machine learning technologies," said Sujayath Ali, CEO at Sequoia Capital backed Voonik.

Ali explained this with how Voonik operates. After downloading the app, a user has to take a short quiz to help the app understand her body type, height, skin tone and personal style. The app's algorithms will then begin tracking her online behaviour - what products does she spends time on; which product details pages does she linger on, and more such.

When sellers on the Voonik platform upload images of their products, the app's system runs image-recognition algorithms to understand the attributes of the product such as color and design pattern. Finally, the app's personal-styling engine, which has more than 10,000 'rules', processes every bit of the collected information to recommend specific products to specific users.

Roposo and LimeRoad, in which Tiger Global is a common investor, follow a community and content-based based approach to discovering the best fit for a user.

Gurugram-based Roposo, founded in July 2014 by IIT-Delhi alumni Mayank Bhangadia, Avinash Saxena and Kaushal Shubhank, allows users to post stories-say, 'three ways I wore my saree' - in the form of pictures, blog posts or videos. The technology revolves around matching the most relevant content with individual tastes to aid decision-making.

Roposo adds about 2 lakh posts a month from users including celebrities and professional bloggers, and recently crossed 2.5 million downloads.

LimeRoad has a community of at least 50,000 women, several of whom create their own mix-and-match designs based on products in the platform's inventory. The most creative ones gain a legion of followers, who can purchase the products that went into these designs from any of LimeRoad's 50,000 sellers.

"Community and content-driven model has better pull and differentiation, ensuring lower cost of customer acquisition and better lifetime value," said Avnish Bajaj, managing director at venture capital firm Matrix Partners, which along with Tiger Global and Lightspeed Venture Partners has pumped in nearly $50 million in curated fashion website LimeRoad.

Fresh content is critical for community driven fashion apps to be able to get repeat customers without having to spend heavily on marketing or offering steep discounts.

"Everybody is focused on (gross merchandise value, or gross sales) but the GMV composition should be driven by repeat customers, not discounts. Otherwise, you are building a blackhole," said Suchi Mukherjee, CEO at LimeRoad. There are, however, several hurdles on the road to achieving a sustainable business model.

Roposo, which has partnered with about 300 merchants, earns commissions on each sale and is experimenting with brand-advertisements on its platform.

Voonik, which positions itself as a fashion personalisation and curation app, has ended its affiliate-fee revenue model and become a marketplace.

"The move to the marketplace model, which gives us 20% margins as opposed to 10% margins in the affiliate-fee model, has helped build a more robust business model," said Sujayath Ali, CEO at Voonik, which handles 25,000 deliveries a day. "Also, there was no control on end-to-end customer experience."

Rahul Chandra, managing director at Helion Ventures, however, is wary about a vendor-driven approach to personalisation. "When you have vendors on your platform, they have an incentive to show multitudes of options, which may result in a weak form of personalisation," he said.

"Also, some websites claim to follow a community-driven approach but they are only platforms for people to express their style. There is no people-to-people communication, which is essential for a social network."

The real challenge with ecommerce is that no company has a sustainable cost of acquiring a transacting customer and lose a lot of money in the first, second and third transactions, hoping to start earning money from the fourth. "The winning model has to be one with the lowest cost of transaction, and breaking even as quickly as you can," said Chandra.